Chegg cuts 22% of workforce as AI tools disrupt edtech business
Chegg announced a workforce reduction of 22% (248 employees) and office closures in response to steep declines in subscribers and revenue, reportedly driven by competition from AI tools like ChatGPT and Google's AI Overviews that keep search traffic within Google's ecosystem. The company expects the trend to worsen before improving.
What happened
Chegg announced on May 12, 2025, plans to lay off approximately 22% of its workforce, or 248 employees, citing competition from AI-powered tools and declining subscriber numbers.
The company attributed its struggles to Google's AI Overviews capturing web traffic, and to OpenAI and Anthropic offering discounts on their language models to college students. Chegg reported a 31% decline in subscribers to 3.2 million and a 30% revenue drop to $121 million in the first quarter.
Reported impact
Chegg announced it would close physical offices in the US and Canada by the end of 2025, cut back on product development, and reduce administrative costs. The restructuring is expected to save the company $45 million to $55 million in 2025 and $100 million to $110 million in 2026.
The company reported a net loss of $17.5 million in the first quarter, with subscription revenue falling by nearly a third to $108 million.
Index analysis
Chegg filed a federal antitrust lawsuit against Google in February 2025, claiming the search engine's AI summaries have decimated its site traffic and revenue. Google has argued its AI summaries send web traffic to a greater diversity of sites.
Classification
Sources and evidence
This record was researched and written by the Index, based on the following original reporting.